Legalization and Regulation Challenges Posed by Cryptocurrencies in India and Worldwide

Legalization and regulation of cryptocurrency in India have yet to begin officially. However, India’s tax collection authorities have begun to investigate crypto transactions. Reserve Bank of India (RBI) Executive Director, S. Ganesh Kumar, stated last month, “Our current position on bitcoins is that we will not be using it for any payments and settlements…though the underlying technology crypto-currencies will not end”. There’s been some speculation around whether India might be trying to develop its version of cryptocurrencies which would be backed by some fiat currencies.

Reports surfaced early last month that government officials had suggested to shut down cryptocurrency exchanges. As the crypto world continues to develop and evolve, cryptocurrency exchanges continue to experience problems. However, the legalization and regulation of cryptocurrency is not something India or any other country should attempt to prevent. After all, crypto market capitalization is now over $479 billion (CoinMarketCap).

The Blockchain Foundation of India has emerged to support the growth and adaptation of blockchain technology, which has the potential to be applied to many different industries. In early 2017, the Times of India reported that a new organization, Digital Asset, and Blockchain Foundation of India (DABFI) had been established to assist in the legalization and regulation of bitcoin. It could serve India’s Reserve bank and other governmental institutions well if they worked symbiotically with these organizations to help facilitate India’s cryptocurrency market.

An article on India’s Economic Times stated that India’s Finance Minister, Arun Jaitley does not consider bitcoin to be “legal currency” according to the findings of his committee. Even the chairperson of the US Federal Reserve, Janet Yellen, has said that bitcoin “doesn’t constitute legal tender”. While it is clear that world governments and their respective reserve banks have been unable to define a comprehensive legalization and regulation framework around the crypto-market, it is something that they should aim to achieve sooner than later to serve the overall best interests of the global financial community.

The European Union has not recommended any legalization and regulation strategy. However, it has stated that standard VAT/GST should be applied to items bought using bitcoin or other cryptocurrencies.  Mainland China has gone back and forth between making cryptocurrency exchanges and ICO’s legal or illegal. Since China is predicted to become the world’s biggest economy in the next 15-20 years, overtaking the U.S., it should be one of China’s priorities to learn to legally and effectively regulate cryptocurrencies.

Russia is currently working on a legalization and regulation process of cryptocurrencies within its borders. While Russia’s finance ministry has recommended making mining crypto unlawful, acquiring cryptocurrencies will be legal. Vladimir Putin has ordered the Russian government to start formulating a plan to regulate cryptocurrencies. It seems evident that the crypto-market is growing and spreading so rapidly that world governments and leaders feel pressured about how to react.

Latin and South American countries, especially Brazil, have been slowly recovering from a recession which has resulted in the hyperinflation of their state-backed fiat currencies. Desperate citizens have tried to find hope by turning to bitcoin and other cryptocurrencies. Despite the socio-economic turmoil, the Brazilian IRS has stated that bitcoin and other cryptos will be taxed. International Monetary Fund’s Managing Director, Christine Lagarde, has said that “We’re about to see massive disruptions” and, therefore, digital currencies deserve serious attention. As the world institutions continue to respond to the cryptosphere, it seems as if the legalization and regulation of cryptocurrencies could usher in a new world economic order.